How can watch manufacturers survive in their fast-evolving environment? What should be their reaction to smartwatches and constantly changing forces? How can they differentiate from competitors? The document proposes a strategic plan from the perspective of the Swatch Group Ltd.

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Anja Ansén
Alexandre Bankowski
Luca Castellanza

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• Introduction
• 5 Forces Analysis
• SWOT Analysis
• Strategic Advise
• Conclusion

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
Introduction

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Internal Rivalry
● 3-ratio concentration index = 45.8%
● 8-ratio concentration index = 64.1%
● HHI = 0,08009
●Different logics for luxury and low-cost
●High but non-measurable effect of counterfeiting
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Internal Rivalry
● Premium: vertically integrated, importance of
brands
●Budget: watch assemblers, brands are less established
●Common: streamlined production process, -competition on design and new models,
- after-sale service, warranty and quality against counterfeiting
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Entry
●Budget: basic know-how, access to commodities or components
● Premium: difficult to establish a brand, owned
distribution channels, Swiss government
support, Swiss vertical integration
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Complements
● Jewelry, clothes, fashion accessories
Substitutes
● Budget: Smartphones (need of “telling time”)
● Premium: luxury goods (need of self-
establishment, social recognition etc.)
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Substitutes - Smartwatches
● Emerging and growing trend, covers all market
segment
● Purpose: “make life easy”
● Technologic firms: Apple, Samsung etc.
● Watchmakers (Fossil, LVMH etc.) trying to
catch up
●Sales of traditional watches have been decreasing recently, but it's not sure to what extent it's been due to sm
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Supply Power
● Big integrated groups: sensible to fluctuations
in precious materials
● Independent manufacturers: are supplied by big
groups, for whom they are an accessory source
of revenue
● Low cost: need for commodities and/or cheap
mechanisms
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Buyer power
● Premium: low price elasticity
● Budget: higher price elasticity
● Common: relatively inexpensive goods,
infrequent purchase, low switching cost, few
users are competent
● Retailers: bargaining power greater than end
customers, no real threat of backwards
integration, rely on manufacturers to carry on
their business.
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion

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Summary
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
Premium
segment
Budget
segment
Internal
Rivalry
Moderate High
Entry Low High
Substitution Moderate Moderate-High
Supply Power Low Moderate
Buyer Power Low Moderate

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The Swatch Group
• 19 brands (low range, middle range and premium)
• Manufacturer of watches, components, movements and
electronic systems
Introduction
5 Forces
Analysis
SWOT-
Analysis
Strategic
advice
Conclusion
18.30%
15.70%
11.80%
5.20%4.70%
3.90%
3.40%
2.10%
34.90%
Swatch Group
Richemont
Rolex
Fossil Group
LVMH
Citizen
Seiko
Casio
Other
Competitors in the watch industry (by market share in 2013)
Currently, the Swatch
Group is market leader.

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Strengths
• Vertical integration
• Balanced product offering
• Financial prowess
• Overall global presence
• Commitment to labour
• Innovativeness (design, materials and processes)
• Electronic systems
Introduction
5 Forces
Analysis
SWOT-
Analysis
Strategic
advice
Conclusion
Weaknesses
• Low social media presence
• Limited presence in the US
• High labour costs

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Opportunities
• Smartwatches
• Online retailing
• Valuable strategic alliances
• Asian market growth
Introduction
5 Forces
Analysis
SWOT-
Analysis
Strategic
advice
Conclusion
Threats
• Counterfeit products
• Price volatilty of raw materials
• Industry inertia
• Exchange rate fluctuations

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Aspects of SWOT-Analysis that the strategy
recommendation builds on
Introduction
5 Forces
Analysis
SWOT-
Analysis
Strategic
advice
Conclusion
The
Swatch
Group
Strengths
• Vertical integration
• Balanced product offering
• Financial prowess
• Commitment to labour
• Innovativeness
• Electronic systems
Weaknesses
• Low social media presence
• Limited presence in the US
Opportunities
• Smartwatches
• Online retailing
• Valuable strategic alliances
Threats
• Counterfeit products

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Discussion question:
Do you think that the selection of relevant strengths or
weaknesses (as well as opportunities and threats) is useful
due to the limited scope of this paper?
Do you agree with the above selection?
Introduction
5 Forces
Analysis
SWOT-
Analysis
Strategic
advice
Conclusion

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Maintain competitive advantage by…
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
Low/middle
segment
•Share strategy
•Try to keep price
parity with
competitors
•Let benefit
advantage drive
share increases
Premium segment
•Margin strategy
•Offer
differentiated
products
•Charge higher
price
• Defend critical capabilities and resources:
• Process efficiency
• Investment in R&D
• Commitment to skilled labour
• Sport collaborations
• Limit supply to competitors
• Exploit access to owned mines

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First strategy: Horizontal differentiation with
smartwatches
44%
of watch executives see smartwatches
as the “next big thing“ according to a
study led by Deloitte in 2014
• In April 2015, Apple has released the first model of a
smartwatch, “iWatch“
• Apple iWatch is an all-in-on smartwatch
• Price: from 399 to 14,000 euros
Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
• In July 2015, Swatch has released the “Touch Zero
One“
• First touchscreen wartch built with beach volleyball in
mind
• Price: 120 euros

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
• Merging of sophisticated technology with Swatch Group design
capabilities:
• Develop technological capabilities by means of strategic alliance
with Google and Intel
• Benefits from knowledge spillover
• Combine newly acquired technological knowhow with design
• Tailored products with regard to features to customers needs:

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
Second strategy: Product improvement
Swatch Group decision in
2011 to phase out the
supply of ETA movements to
rivals
• Counterfeit is considered as
an important weakness for the
Group
• More important risk for the low
and middle segment

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
• In the luxury segment, Swatch should further advance quality of
components to take an advantage on its competitors by 2020
• In the low and middle segment,
Swatch Group should propose
customizable watches for the customers:
• Create a new eshop platform
• Each customer could create its own
watch
• Price would vary depending on the
features used
• Swatch Group should also enhance its jewellery offerings in order to
complement with its watches products

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
Third strategy: Increase integration in the US

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
• Distribution is a critical resource to enter the industry, but for
Swatch Group should be not too hard to establish a partnership
• Swatch Group should increase partnership with some important
retailers
• Swatch Group should also increase the number of stores in the
US:
• Hour Passion
• Tourbillon Boutique

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
Forth strategy: Increase brand equity
Watch executives rate
social media as the most
important marketing
channel, closely followed by
print and then blogs

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusion
• Explore new collaborations with fashion labels
• Celebrity endorsement for the middle range and the premium
segement
• Increase social media presence of undevelopped brands:
• Tailored social media campaigns with youtubers
• Advertising
• Event promoting

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Introduction
5 Forces
Analysis
SWOT-Analysis
Strategic
advice
Conclusio
n
Innovation
beyond
traditional
watches
Smartwatches,
jewelry,
customization
Differenciation
in marketing
strategies
Celebrity
endorsment, social
media presence,
collaborations in
fashion
Increasing the
Group
presence in
the USA
Partnership with
retailers, new
stores

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Questions and Comments

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References